ENRON: From an individual that writes articles for Morningstar and has read my material extensively comes this unsolicited comment, "You could have saved Enron employees nearly $1 billion!"

Why’s that? It’s called diversification- how many stocks do you have to have in a portfolio in order to insulate it from unsystematic risk? People who buy individual stocks rarely have a clue to what may be going on within the interior of the company. If you disagree, then you already shorted Kmart stock last year, right?

What about the analysts that said Enron was a great buy even when it started to go down? I ask you, why do you get mesmerized by analysts who are beholding to their own firm for underwriting fees? But I take a different take in that, why is there this inherent assumption that these (normally) young analysts have a competency to do a proper analysis anyway. Cynical? Do you remember Long Term Capital? It was a hedging fund with two Nobel Laureates and 27 PhD’s who literally guaranteed a no lose investment scenario. And what happens? A meltdown of the currency they hedged causing an effective bailout of the U.S. banking system by the FED to the tune of $3.5 billion.

So, go ahead. Read all the analysts. Tune if CNBC, read the WSJ. But, except for some long term readers of my site, I bet you don’t have a clue to what diversification actually is. Hence you are playing a high stakes game when you don’t even know the rules. Maybe you will be successful, but it will invariably due to luck, not skill.

ELDERLY DRUGS: (JAMA) About one in five seniors has been "inappropriately" prescribed drugs such as antidepressants and tranquilizers, an estimated seven million Americans ages 65 and older in 1996 were prescribed at least one of 33 drugs deemed inappropriate for use by seniors because of possible side effects

In 1996, 21.3% of "community-dwelling" seniors -- those not in institutions such as hospitals or nursing homes -- were prescribed an inappropriate medication. Based on the panel's classification, the study determined that 2.6% of seniors used at least one of the 11 drugs, including barbiturates, that "should always be avoided by elderly patients"; 9.1% used at least one of the eight drugs that "would rarely be appropriate"; and 13.3% used at least one of the 14 drugs "that have some [benefits] but are often misused."

"Elderly patients are falling and sustaining hip fractures because of the overuse and misuse of a wide variety of more modern agents, even those short half-life tranquilizers and hypnotics that would never make it onto any most wanted list of inappropriate drugs. Some patients are being labeled with diagnoses of new illnesses, or are simply viewed as 'just getting old' when they manifest adverse effects of anti-psychotic drugs used to excess"

There's no "I" in team. But there is in "Shove it".

J. Wagner

ALLOCATION- (Investment Advisor) Longtime readers have seen comments from Bill Jahnke regarding the fact that static allocations are rarely that beneficial for clients- primarily designed for planners who are neither that knowledgeable nor sophisticated. “For advisors avoiding forecasting is very appealing. Forecasting asset class returns is challenging, ongoing work.. Professional and business risks are high for market forecasters and market timers. The problem is that clients are oblivious as to the reasonableness of the economic assumptions required to support the return assumptions. Since financial outcomes will not be known for many years, SAA (Static Asset Allocators) advisors can sit back, hope for good markets and investment selections and collect their fees. In the meantime, short term asset class returns can be explained away as being in the distribution or the return expectations, regardless of how probable the event.

Unfortunately, the belief in the stable return generating process leads to serious planning and asset allocations errors. SAA advocates preach that the chance that stocks will underperform bonds and cash quickly falls with the length of the investment horizon.

This is often demonstrated using historical stocks, bond and cash returns. The selling point for long term investors is that stocks have outperformed bonds for investment holdings over long periods.

(To interject my comments- an advisor trying to project a clients short term risk scenario is going to have a very difficult time indeed. It requires an understanding of the client that is generally NOT going to be found by the client sitting in an office. It is going to be generated by going to the client's home, seeing how they live, what they do, how they think (or if they do) etc. That review may be counter to the statements made by the client sitting in a private office. And you certainly need to see how a couple interact in their own home. It is ALWAYS necessary to sit with both man and wife. Or same sex partners as well. Rare that anyone should have 100% in stocks that remains static. Always, ALWAYS remember 1973/74. Only with that categorically enmeshed in one's mind can any risk scenario be estimated.)

Jahnke notes the "process" of defining risk: “To help define the client's risk tolerance for short term portfolio volatility, risk tolerance questionnaires have become popular tools of the trade for SAA advocates. While the use of risk tolerance questionnaires to establish static asset allocation policy impresses clients, remember that their validity rests on the false assumption that the return generating process is stable.

(I have repeatedly stated my total disdain for the simplistic risk questionnaires. They are almost useless.)

His additional commentary on the efficient market (everyone has all the same information at the same time. Rare that trading that can outproduce a basic index), "what advocates of SAA need to understand is that modern portfolio theory does not necessarily presuppose that markets are efficient or that the process generating returns is stable." Additionally, a recent study by Fama and French say that the forward looking equity risk premium is currently in the range of one or two percent, based upon an analysis of dividend yields, earnings growth rates, price/earnings ratios, interest rates and stock returns. This is in stark contrast to the historical risk premium of seven percent based on a simply extrapolation of historical returns.

* The client financial situation needs to be defined and qualified, including projected sources of income, consumption, savings , taxes, assets and financial goals.

* Asset classes need to be defined and forecasts of expected returns produced for each asset class. The pattern of asset class returns need not be a simple geometric progression over the client's investment horizon

* The asset class expect returns for each of the client's accounts for each of the client's accounts need to be forecast , taking into consideration expense rations, taxes, and assessments of the net valued added, if any, to be gained from security and fund selection.

* An appropriate asset allocation strategy needs to be determined by evaluating the prospects of achieving financial goals produced by varying asset allocation strategies. The evaluation includes testing the prospects of not achieving the client's financial goals because of a failure of the asset classes to perform up to the most likely expectations.

It is not easy. And it can make mistakes (I certainly have). But the adjustments are made from an intensive amount of reading and research- not staying with some sophomoric computer strategy. SAA is like a broken clock- it is always right twice a day. But those may be bad odds for a long term investment strategy. You always have to account for 1973/74 and the emotional issue of being able to sleep at night. Losing over 45% will cause insomnia- and busted marriages.

401(k): 42 million people participate in 401(k)'s and similar plans, with total assets reaching $2.6 trillion last year. But are they getting advice for the investment options they have? Not really. The Department of Labor has limited what the employer (ER) can (supposedly) do for the employee(EE). Unfortunately, the ER has allowed such "negligence" to breach a fiduciary obligation to the EE's by adding fees and other costs directly on the EE. And offer numbers upon numbers of funds that only tend confuse the EE.

Anyway, a recent bill would allow ER's to offer advice. But there is a lot of conflict since it would allow the funds to provide the advice directly to participants. Many believe the conflict of interest would taint the process.

Also, current restrictions prevent a company that manages investment options in a 401(k) from increasing the fees it would collect by recommending its own products. Fidelity says, "We feel the issue isn't whether an adviser has a perceived conflict or not." "The real issue is whether an adviser is giving prudent advice." They added that the bill adequately protects investors because advisers would still be liable for imprudent advice."

Well, tell me who will provide the "prudent advice" at Fidelity. A broker? Remember, they have never been taught the fundamentals of investing. A CFP? Better- but they also have not been provided an education in the real life application of securities. What I think would happen is that each employee would simply fit into a particular category that came out of a computer program- and the fund family had a product that fit that (supposed) risk scenario. As to the risk questionnaires, I hope you already read the comments by Jahnke above and also in my 2002 Guide to Asset Allocation

"Proponents of the bill say investment firms would be held liable if they offered advice that was not in the best interest of plan participants."

Again, who decides? Broker? Planner? Fidelity officer with a series 7? Not even close

"Lobbyists for consumer groups worry that allowing firms that manage 401(k) plans to offer advice could mean less independent guidance. AARP said, "It would be a huge step backward."

I think independent advice might be better but I am more inclined to think it will be more of the blind leading the blind.

MORE 401(K): The average 401(k) participant contributes 6.8% of salary before taxes to his or her retirement plan, but the amount contributed by any one participant varies widely by his or her age, salary and plan design

The study found that average 401(k) contribution rates tend to rise with age within all salary groups. Of workers earning $20,000 to $40,000 a year, those in their 20s contributed an average 5.3% to their 401(k) plans, while those in their 50s contributed 7.6% on average. Workers in their 20s earning between $80,000 and $100,000 contributed an average 6.8%, while those in their 50s making the same amount contributed an average 7.3%.

Within all age groups, the average contribution rate tends to rise for salaries up to $80,000 a year, and then falls thereafter. For example, employees in their 40s earning $20,000 to $40,000 a year contributed an average 6.7%, and those earning $60,000 to $80,000 contributed 7.3%; however, those earning more than $100,000, contributed less than 5%.

Two features of 401(k) plan designs also influence participant contributions, the study found. One is the availability of plan loans, and the other is the amount of employer contributions.

Contribution rates tended to be higher for 401(k) plans that permit loans to participants, a feature available to 84% of those in the study. Employees in plans offering loans contributed an average 0.6% more to their 401(k) plans than employees with no borrowing privileges.

However, despite the general availability of these loans, only 18% of the participants in the 1999 study actually had a loan outstanding. In addition, for those with loans outstanding, loan balances amounted to only 14% of total account balances.

About 91% of the 1.7 million participants in the study were in 401(k) plans that offer employer contributions. For employees in such plans, the average total contribution rate was 10% of salary including the employer contribution, as compared with 7.4% for those in plans in which the employer doesn't pitch in funds.

NEW ESTATE RULES: Each person is allowed $1,000,000 as an exemption to estate tax during their lifetime. (Caveats apply- for example, I am only referring to U.S. citizens.) Anything over this amount left in your net estate and the estate tax starts at 50%.

You can gift away assets during your life, but anything over $11,000 per year is generally an offset against your $1,000,000 lifetime exemption. For example, gifting $25,000 to son (spouses are allowed any amount- but again remember there are caveats) results in a $14,000 charge against the $1,000,000 leaving $986,000 to escape taxes when you die.

MORAL EGOISM: New York State’s system for safeguarding the financial affairs of incapacitated people is riddled with problems that have drained the estates of the vulnerable and enriched politically connected lawyers and others, according to reports released December 3 and 4 by the state’s chief judge, Judith S. Kaye. More than a dozen lawyers and judges could be disbarred for the questionable and sometimes illegal practices uncovered in a two-year investigation of court-appointed fiduciaries, a court official said. The lawyers and judges have been referred to committees on judicial conduct and to disciplinary committees for the counties in which they work.

Why did they do it- because it was “right” for them. It’s called moral egoism- you can justify anything if it is best for you, your family, corporation. How do you think the officers at ENRON justified their actions?

WILL YOU BE AUDITED? WILL YOU CHEAT ON YOUR TAXES? (NY Times) Audits have become rare — over all, just one in 200 taxpayers face one each year. But the chances are much higher — one in 90 — among the working poor who apply for the Earned Income Tax Credit. Put another way, that group accounted for 44 percent of all audits in 2000. For everyone else, the overall risk of an audit was just one in 370, a record low.

The number of agents in the criminal division has fallen to 2,882 this year from 3,327 in 1996. The I.R.S. brought 2,340 tax evasion cases in the year ended Sept. 30, about half of which involved pure tax cheating.

My mother buried three husbands, and two of them were just napping.

Rita Rudner

ELDERLY: Medication toxicity and drug-related problems can have profound health, safety, and economic consequences for older adults and have been implicated in up to 30% of hospital admissions in the elderly.

Meetings are indispensable when you don't want to do anything.

John Kenneth Galbraith

WILL THEY REBOUND IN 2002: (WATTS) They studied 1,900 tech companies back to 1995 and found that only 3.4% of the companies whose stock price plunged to single digits rebounded to $15 or higher within a year. Of the 437 com-companies that plunged to single digits in 2000, only 5- 1.1%- have rebounded in 2001 (and that was as of July 2001)

LONGEVITY: (National Center for Health Statistics 2001) American males born in 2000 now enjoy an average life expectancy of 74.1 years, up 0.2 years from 1999. Females have an average life expectancy of 79.5 years, up 0.1 years. Women can still expect to live longer than men on average, though the gap in life expectancy continued a years-long narrowing trend last year. A 7-year difference between the sexes recorded in 1990 was down to 5.5 years last year. Significant racial differences remain, however. Age-adjusted mortality continued to fall for heart disease and cancer--the top two causes of death--as well as several other leading causes, including suicide, homicide, accidents, stroke, diabetes, chronic lower respiratory disease, chronic liver disease and cirrhosis. Mortality for diseases that disproportionately strike the elderly, such as Alzheimer’s and pneumonitis, increased.

MEDICAL ADVICE (Kaiser) Three-fourths of American Internet users between the ages of 15 and 24 have used the Internet to find health or medical information

MORON AND MORON INVESTORS: A 24-year-old money manager accused of swindling investors out of $50 million pleaded guilty to criminal securities fraud charges. Now some of the investors did not have the requisite skills to understand a hedge fund. But even so, 24 years old!!??? No one would use a 24 year old to fix their shoes never mind give over $100,000's. And this was a hedge fund!!!

WEBER'S LAW- The impact of a change in the intensity of a stimulus is proportional too the absolute level of the original stimulus. For example, the difference between nothing and $500 is greater psychologically than the difference between $500 and $1,000, so most people want to lock in the sure $500.

MAYBE: The consumer confidence index keeps going up. The market may rebound since it is a leading indicator. I am looking at adjusting my positions now.

STOCKS VS. BONDS: Publisher Ed Slott said many of the financial planners he talks to say their clients want to move out of stock funds and into bond funds, unaware that bond prices are high and will fall when interest rates rise.

So? The reason why people should have considered a switch- even irrespective of the WTC- was the fact that after 8 interest rate drops, the economy was still spinning downward. Was it representative of 1973/74 (a mandatory point of reference)? Not sure but I was unwilling for clients to take that risk and I opted for a more conservative position into bonds and bond like investments. Sure the switch to bonds can be costly when rates rise. But does anyone even remotely think that rates are going to rise in the near term? Not even close (and only if inflation should rise- which is not apparent at any level now) . Sure there will be a time to get out of bonds but in the interim, they have used a conservative investment that gained a return and avoided the volatility. For those that saw the market go up since the WTC, I was surprised. But as of this writing on 1/31, the last few days of the market have been anything but good. The U.S. will get better but I still think it will be slow going. The country’s bill for terrorism- though mandatory- is running about $1 per month. That’s a lot for the U.S. to eat each month.

MORE HEDGING: (WSJ) Two Dallas hedge funds -- Integral Hedging LP and its sister Integral Arbitrage LP -- indicated they were outperforming the overall stock market, when in fact the investments had declined as much as 90%, according to a lawsuit filed in Dallas County District Court. The complaint underlines the erratic consequences of the recent rush into hedge funds, loosely regulated investment pools designed for wealthy investors. As the bull market wound down, money flooded into hedge funds, and the trend is continuing (though not by me). Tremont Investment Advisors indicated a record $22.3 billion flowed into hedge funds in the first three quarters of this year. By comparison, $8 billion was added to these "alternative" investment pools last year. The managers pitched a strategy "in writing and in face-to-face meetings" that guaranteed the institute couldn't lose "any" of its investment, even in a declining market. The plan relied on a complicated system of puts and calls, and a promise to hold 70% of the investment in cash. Millions were lost by (supposedly) sophisticated investors who, apparently, had never heard of Long Term Capital. It had more brain power on staff than anything outside of those building a nuclear bomb. The results were about the same, too.

RETIREMENT: (Allstate) Baby Boomers who already feel sandwiched between financial obligations to children and aging parents can look forward to more of the same, plus unprecedented levels of debt for themselves in retirement. Findings indicate that 37% will be financially responsible for parents or children during retirement and 7% will be responsible for both. The survey also revealed that Baby Boomers have saved an average of only 12% of the total they will need to meet even basic living expenses in retirement.

Some parents may be on Social Security before their children get out of high school. Consider: In 1999 over 14,000 women over age 40 had babies; the 1989 the figure was just over 9,000; 11% of all newborn babies in 1999 had a father age 40 or over; the 1989 the figure was under 8%. This report is from Prudential, Plc. via Sweden. The numbers may be even higher in the U.S.

OLD. The number of elderly over the age of 65 has tripled in the last 50 years to 420 million. There were about 131 million in 1950. By 2030 one of every 5 will be 65 or over. Italy and Japan would have the greatest number at 28% of their total population. Southeast Asia's over age 65 population will triple. Disability in the wealthier nations will decrease but will increase in the less wealthier nations.

FRAUD- (U.S. Federal Trade Commission) 31% of the more than 20,000 fraud complaints the FTC received from January 1 to September 30, 2001, were Internet-related -- up from 26% the previous year

We were happily married for eight months. Unfortunately, we were married for four and a half years.

Nick Faldo

MEDICARE- Part A covers hospital, skilled nursing, hospice care and some home healthcare services. Part B is an optional supplementary program that was designed to help cover physician services, outpatient care and other services not covered under Part A. HHS said the increases were mandated by federal law, under which the Part A deductibles are required to be updated on an annual basis and Part B deductibles have always been required to cover at least 25% of the estimated program costs.

RESEARCH OR EMOTION?: Author John Nofsinger- "People who do not use rigorous quantitative criteria in their decision making often get a "feel" for a stock value. The feel comes from investment socialalization. What does CNBC say? What does my co worker say? This investment socialalization turns over investors' opinions into your "facts" and that is what you base your decisions on."

I take it a bit further. People cannot do quantitative analysis since they are not even grounded in the fundamentals (alpha, beta, diversification, correlation, etc.) I liken this to people who say someone knows “everything” about curing cancer. This remedy, that remedy. Then they make their first cut in their first operation and say, "Geez, what's this red stuff?". Sure the patient might live. But it may have been due to others. Or circumstances. Or luck. Anyway they may die prematurely. Same thing with a selection of an investment by people who merely perceive- or are perceived- to be competent. After all, wasn’t the downfall of ENRON seen by all the employees. Yes, I know some of them unnecessarily got stuck holding the stock. But most of the others voluntarily put everything in the one position cause they worked for the company and believed in it. Sorry, doesn’t work. You either know what diversification is by the numbers or you too can get caught in a bad investment decision.

POVERTY: Despite glowing optimism 20 years ago, the rich nations' record in raising the developing world to a minimal level of material well-being has been nothing short of disaster. In 1983, the World Bank predicted that developing nations' average gross domestic product would grow 3.3 percent a year over 15 years. In fact, it barely grew at all.

About a third of the world lives on the equivalent of about $2 a day. In 1820, the richest country had only three times as much income per person as the poorest; today, the richest nation has 30 times the income.

In 1999, the World Bank reported that the United States gave 0.1 percent of its economic output for development, or $9.1 billion, the lowest proportion among the 30 or so wealthiest nations. Japan gave more than $15 billion — still skimpy, but 0.35 percent of its output. Moreover, America stipulates that about two-thirds of the $9 billion must be spent on American products.

WHAT A RIPOFF (Boston Globe) The Prescription Access Litigation project, a consumer coalition based in Boston, has sued 28 pharmaceutical companies, alleging that they manipulate Medicare drug prices by selling doctors "deeply discounted" medications while encouraging the physicians to bill the government at full price. Medicare does not cover most prescription drugs but does pay for a few medications administered by physicians and other providers, such as cancer therapies. Spending for these drugs is based on so-called "average wholesale prices" -- reports by drug makers to the government of how much a product sells for in the retail market. Pharmaceutical companies are then required to sell the product to Medicare at 95% of the AWP, and Medicare beneficiaries generally pay 20% of the cost. The AWP is often "inflated" as drug companies seek to gain market share by offering physicians discounts, usually of between 13% to 34% but sometimes as high as 85%. The companies then allegedly encourage physicians to bill the government at the higher AWP, allowing doctors to make a profit.

In spite of the cost of living, it's still popular.

Laurence J. Peter

ILL- New York Times (2 Oct 2001) Some experts say many seriously ill people who appear competent may actually have impaired abilities to make complicated medical decisions. Often, experts say, this impairment goes unrecognized, and regrettable decisions are made. Patients may refuse surgery or chemotherapy, only to have their diseases become life-threatening; they may consent to join experimental studies without fully understanding the risks; they may make life-and-death decisions like signing do-not-resuscitate orders. But other experts disagree, saying that even the most seriously ill patients have the capacity to make decisions, and that to think otherwise will throw health care back 20 or 30 years to a time when doctors paternalistically told patients what to do.

CARETAKING IS NEVER EASY: From a reader- "Have been caretaking my 92 yr. old mother for past 8 yrs. or so...she had several stokes in past couple months & finally had to put her in full-time care nursing home...really broke my heart...but she doesn't even know who I am anymore...spent 4 hours today, giving her pedicure & manicure & she thought that I was her M.D." I urge anyone who acts as a caregiver to remember to take care of yourself first- otherwise both of you will go downhill all the faster. Don’t become a martyr who also ends up needing care.

HEALTH CARE: (NY Times, Centers for Medicare and Medicaid Services) By 2010, health care is expected to account for 16 percent of the nation's economic output, up from 13 percent today and 4 percent 50 years ago. In 2040, economists say the sector could exceed 20 percent, and David M. Cutler, a researcher at Harvard, has argued that even 30 percent would not be unlikely.

OLD WORKERS ARE GOOD WORKERS: A healthier nation will have a larger work force because many of its citizens can work well into their 60's, 70's and 80's; the more labor a society has, the faster it can grow.

OOPS: (Financial Advisors Legal Association, F.A. Legal). In 2002, the average cost per claim could rise to $30,000 that individual Financial Professionals pay to defend themselves against litigation, and in some cases it could exceed $100,000.

They did note this issue (and I agree)- ``The arbitration system is becoming more and more like the court system,'' he said. Major differences between arbitration and the court system include a six-year statute of limitations to file for arbitration versus four-years in most courts. Also in arbitration, there are few motions for summary judgment and rules of evidence do not apply. All of these factors can lengthen the arbitration process making it very expensive.

As a far as claims are concerned, claims are up 70 percent and arbitration is up 25 percent over last year.

Here are some rules: NASD Rule 3010 Supervision- Members are required to have a system in place to supervise each registered representative or others associated with their firms to make sure they comply with securities laws and regulations and NASD Rules. An increase in churning complaints has prompted a renewed interest in this rule.

NASD Rule 3010 (d)- Review of Transactions and Correspondence- Supervisors will be under closer scrutiny to determine if they are actually supervising registered representatives who work under them. Among other things, under this rule supervisors are supposed to review all incoming and outgoing correspondence. With the rise in electronic correspondence in the Internet age, the scope of this rule is much broader.

NASD Rule 3030 Outside Business Activities of an Associated Person and 3040 Private Securities Transactions of an Associated Person- More and more brokers are being called on the carpet for doing business away from their firms. These rules require that brokers receive written approval from their firms before participating in any private securities transaction. The real question here is just what exactly qualifies as a security. It varies from state-to-state and a few such as telephone payphones, airplane mortgages, and loans to relatives do not appear to be securities at all, but they are in some states. As a policy, it is best to contact state securities departments or bureaus for their definition of a security.

NASD Rule 2310- Recommendation to Customers (Suitability)- When recommending securities to investors, brokers must make sure they are suitable for investors based on their financial status, tax status, investment objectives, or other information.

The article noted that “Many retirees who suffered during the recent decline in high-tech markets and are unlikely to recoup their losses are studying this rule carefully.” I go further- a large chunk of what was sold to the elderly was ABSOLUTELY unsuitable.

ABUSE, NEGLECT, AND EXPLOITATION OF THE ELDERLY (Elder Law Ebulletin) Elder abuse takes on many forms. Accurate information on the frequency of occurrences is difficult to obtain, for many reasons, including non-reporting of abuse and incapacity of the victim.

“The reality in many of the elder abuse cases is that by the time the exploiter is caught, charged and found guilty, the exploiter has no funds with which to pay any court-ordered restitution. In researching elder abuse opinions, we have found that many of the reported elder abuse cases concern not the act of elder abuse but procedural errors occurring during the trial. Those that do discuss the elder abuse claims illustrate the devastation visited on the elderly victims by the exploiters and abusers.

One recent case involved a combined appeal of an attorney’s fee award. The attorney, a well-known elder law attorney, represented conservators in extensive and contentious litigation protecting the wards’ assets. (On a side note, the attorney drafted California’s elder abuse statute.) The cases involved impaired elders who had been "befriended" by a non-relative who quickly took over the elders’ finances. The attorney’s argument against a fee award reduction (the subject of the appeal) was to avoid dissuading attorneys from taking financial abuse cases. Elder abuse cases are difficult to litigate and require a certain level of experience. Reducing the attorney’s fee award would discourage other experienced attorneys from taking these cases.

In an unpublished opinion involving a criminal case, the caregiver, who had married the enfeebled elder, was charged with embezzlement and elder abuse. She appealed the conviction on procedural grounds involving her right to assert a good faith belief defense that the elder had consented.

Elder law attorneys need to be familiar with the signs of elder abuse, whether physical or emotional abuse, neglect or financial exploitation. Develop a checklist for use in cases where abuse is suspected. The National Center for Elder Abuse is an excellent resource.

In drafting powers of attorney (whether or not durable), take care to limit the agent’s powers as narrowly as possible to accomplish the task at hand while limiting the chances of abuse. Check any applicable provisions in the state statute. Consider including a reporting requirement in a separate, companion agreement to the power of attorney that is signed by both the principal and the attorney-in-fact. The reporting requirement could be triggered by a transaction over a certain dollar amount or submitted at certain specified intervals.

Basic language might be along the lines of something such as: "Monthly/quarterly/annually, my attorney-in-fact shall submit to John Jones a verified accounting and supporting documentation." or "My attorney-in-fact shall be required to submit to John Jones a verified accounting and supporting documentation for every transaction over $100." John Jones might be another sibling, an accountant or attorney, or any person that the principal trusts to act as a watchdog over the attorney-in-fact.

Or, a more comprehensive reporting requirement: "Monthly/quarterly/annually, my attorney-in-fact shall account to me and, during any period of time in which I am incapable of considering and reviewing such accounts, to John Jones. John Jones shall have the power to demand an accounting at any time. John Jones shall also have the power to remove my attorney-in-fact [and name a successor?] if John Jones, in his/her discretion, determines that such removal and replacement would be in my best interests. Any exercise by John Jones of the power to remove and replace my attorney-in-fact hereunder shall be exercised by a writing signed by John Jones, recorded in the County Recorder's office in the county in which I then reside, and delivered to my attorney-in-fact and any other person John Jones reasonably knows to be then relying on this power of attorney. In the event that my attorney-in-fact cannot be located, notice of such removal and replacement shall also be given by publication in a newspaper of general circulation in the county in which I then reside, but such removal and replacement shall be effective upon the date of execution of the notice, whether or not publication is completed." Who should receive the accounting? It might be the principal, if the principal is not incapacitated. Still, this may not be effective if the principal might be unduly influenced by the attorney-in-fact. Where the attorney-in-fact is the principal’s child and the principal has several children, the attorney-in-fact could be required to submit a regular accounting to her siblings. Although the accountings could be sent to the principal’s attorney, questions may arise as to how closely the accountings must be reviewed and the attorney’s liability for reviewing the accountings. Some state power of attorney statutes provide a procedure for an accounting. It may provide more protection for the principal, however, to require reporting without the need of a court order or waiting until the agent’s authority is terminated. Another option is to have the principal direct his or her financial institution to send monthly account statements to someone other than the attorney-in-fact. This may reveal some irregularities that signal abuse. If the client needs to employ a caregiver, draft a contract that prohibits the caregiver’s acceptance of gifts or loans from the client, whether inter vivos or testamentary. Include a clause in the contract that restrict the caregiver’s access to or use of the elder’s accounts and prevents the caregiver from filling out checks for the client. Require the caregiver to obtain an adequate bond. Elder abuse is a growing problem that has devastating effects on clients. Although elder law attorneys may not handle these cases, they still need to educate themselves and their clients on the signs and remedies."

WON'T HAPPEN: The WHO (World Health Organization) report, which was released last month, stated that eight million lives could be saved and $186 billion in world income now lost to illness could be recovered each year if the world's nations donated a total $101 billion annually for medical research and treatments for infectious diseases like HIV, malaria and tuberculosis. The report estimated that $66 billion in new money is needed each year to improve international health; $38 billion of this total should come from industrialized countries, while $28 billion could be donated by developing nations.

SOME PEOPLE NEVER LEARN: Reed Slatkin, a Scientologist minister turned investment adviser, was a mediocre stock picker who ran a "fraudulent Ponzi scheme" that took in nearly $600 million between 1986 and 2001. Slatkin told creditors that their money had increased as much as 20% to 50% a year (apparently the investors never questioned numbers that high.) The investors included CNN legal expert Greta Van Susteren, movie producer Armyan Bernstein (Air Force One) and actor Giovanni Ribisi (Boiler Room and Saving Private Ryan) among others. Let’s be careful out there!

There used to be a real me, but I had it surgically removed.

Peter Sellers

FROM A READER: "I came across your website while doing research for an MBA class. It's excellent, and I wanted to say thanks. I only wish my father had read it, several times. He had a PhD in microbiology, read extensively, taught at universities, and trusted a bank-sponsored financial advisor with all his retirement monies. He passed away a few weeks ago, so I've now discovered just how poorly it was structured, and what I now have to clean up for my mom. Keep spreading the word. Determining WHO to trust with your money is critical!"

TRUST: The SEC files suite against an advisor who handled millions of dollars of professional athletes money. He told them it was in safe and secure investments- actually he had stuffed them into collateralized mortgage obligations that have enormous upsides if interest rates go the "right" way- or go belly up if they move opposite to the crystal ball projections indicated. Why did they use him to begin with? The SEC noted that many were seduced into investing by displaying the trappings of his own wealth- his mansion, expensive cars and luxurious offices adorned with pictures of him posing with athletes and other celebrities. They noted that he "targeted those who were financially unsophisticated but nevertheless wealthy".

SEX: (American Journal of Public Health) The majority of adults in the United States do not engage in risky sexual behavior.

*Seventy-seven percent of respondents reported having only one sexual partner within the past year. Only 9.2% reported having two or more partners within the past year.

*Eighty-two percent of participants said they had no new partners within the past 12 months, compared to 12% who said they had one new partner and 6% who said they had two or more new partners within the same time period.

*Of those who reported having a sexual partner within the past year, 26% said they used a condom at last intercourse. Of those who used a condom, 54.9% said they used it to protect against pregnancy and STDs, while 8.7% said they used it solely to protect against disease.

*Forty-four percent of participants said that condoms are "very effective" at preventing HIV transmission, while 46.2% of respondents said that condoms are "somewhat effective" at preventing HIV. Nearly 4% of respondents said that condoms are "not at all effective" in preventing HIV transmission.

*Only 4.1% of respondents said they had engaged in any risk behaviors for HIV or had received a positive HIV test result.

*Only 7.7% of participants perceived themselves to be at "medium or high" risk for HIV, while 31% said their risk was "low" and 61.4% said they were at no risk for the disease.

*Respondents who were young, male, black, Hispanic, not married or living with a partner and who had less than a high school education were more likely to be at increased risk for HIV and to perceive themselves at medium to high risk for the virus.

*Respondents who had a higher actual HIV risk and participants with a higher perceived HIV risk were more likely to have had two or more sex partners, more likely to report condom use at last intercourse and more likely to have undergone a voluntary HIV test.

MEDICARE: Hospitals will receive a 2.3 percent increase in Medicare payments for outpatient services effective January 1, 2002 Total payments to physicians and other non-physician practitioners under Part B of Medicare are projected to increase by 1 percent in 2002, from $41.2 billion in 2001 to $41.7 billion. Individual doctors will be paid less under the rule, however, because the payment formula is tied to the economy, which is slowing.

INTERNET AND FINANCIAL ADVICE: The survey found that 62 percent of affluent individuals check their advisor's advice with their own research, even though 84% believe their advisor thoroughly researches all the options available.

Only 39% report seeking a second opinion on their advisor's advice; 87% report they are confident their advisor presents an objective analysis that fits their personal situation versus what will earn the advisor the most money. Those who reported using the Internet for financial planning are most likely to use it for: - Researching specific investments (74%) - Tracking investment portfolios (55%) - Doing general research on financial planning (53%) - Performing stock market or other investment trades (45%) - In addition, 20% reported using the Internet to communicate with their advisor. Only 6% reported going online to purchase an insurance product.

A majority of respondents (54%) say they currently use a professional investment advisor or financial planner and 45% say they prefer to use this type of professional. Nearly half of the respondents (45%) say they use professional investment advisors or financial planners most frequently for financial advice, up from 37% last year. - Reliance on other types of professionals is down compared to last year: stockbrokers (32% versus 50%t), accountants (22% versus 48%), attorneys (13% versus 34%), insurance agents (7% versus 31%) and banks (7% versus 19 %).

ELDERLY (AMA) About one in five elderly persons has been inappropriately prescribed drugs such as antidepressants and tranquilizers that can leave them dazed, groggy or susceptible to falls.

EXPERT WITNESS: I am acting as an expert on several securities violations regarding suitability as well as on a major insurance litigation by a "nationally touted" CFP firm whose president runs many TV infomercials. He built a $22+ million mansion. He also, for this client and I bet for almost all the others, violated breakpoint sales by splitting monies into several fund families, selling over $500,000 in municipal bonds in 1990 earning over an average of 8% and put them into bond mutual funds with about a 6% load and no guarantee. All the while by stating that he was trying to increase after tax income. He sold out several positions well over $700,000inside an IRA and then put all into two DIFFERENT variable ANNUITIES- touting the tax sheltered feature. And he not only gets a HUGE commission, he then charges a 0.5% additional fee acting as a (supposed) Registered Investment Adviser which he increased later to 1%. But that isn’t the worst. He took all the life policies and sold them. However, in the next few years he flipped the 5 policies three times after holding them only about 2+ years. That’s where the money comes from to pay for such a mansion. Whenever you see anyone living an opulent lifestyle in this business, you better take a closer look at the money you invested cause that’s where it is all coming from. Let’s be careful out there.

Somewhere on this globe, every ten seconds, there is a woman giving birth to a child. She must be found and stopped.

Sam Levenson